Vail Resorts (NYSE:MTN) has already seen a major impact from COVID-19 and the related downturns in travel and vacation spending. Yet the company is bracing for even more of a financial hit.
The ski resort giant said on Wednesday that the poor economic situation could spread beyond the abbreviated 2020 ski season, including by keeping resorts underutilized this summer and into fiscal 2021.
In response, Vail is scaling back on its capital spending plans, mostly by deferring ski lift upgrades and other improvements that would have cost between $80 million and $85 million this year. It has also canceled its next two dividend payments, which will preserve roughly $140 million. Most of its U.S. hourly employees are being furloughed, and salaried workers are seeing pay temporarily cut by between 5% and 25%.
Vail is hoping for a quick end to the COVID-19 economic slump but is preserving cash in preparation for more challenging scenarios, including a prolonged downturn in vacation demand.
"The actions we are announcing today will allow the company to maintain cushion on our liquidity and financial covenants," CEO Rob Katz said in a press release, "through the upcoming quarters." Vail will decide whether to restart its dividend payment in December, management said.